Research Portal

July 1, 2022

A Probabilistic Portfolio-based Model For Financial Valuation Of Community Solar.

Shakouri, Mahmoud; Lee, Hyun Woo; Kim, Yong-woo. (2017). A Probabilistic Portfolio-Based Model for Financial Valuation of Community Solar. Applied Energy, 191, 709 – 726.

View Publication


Community solar has emerged in recent years as an alternative to overcome the limitations of individual rooftop photovoltaic (PV) systems. However, there is no existing model available to support probabilistic valuation and design of community solar based on the uncertain nature of system performance over time. In response, the present study applies the Mean-Variance Portfolio Theory to develop a probabilistic model that can be used to increase electricity generation or reduce volatility in community solar. The study objectives include identifying the sources of uncertainties in PV valuation, developing a probabilistic model that incorporates the identified uncertainties into portfolios, and providing potential investors in community solar with realistic financial indicators. This study focuses on physical, environmental, and financial uncertainties to construct a set of optimized portfolios. Monte Carlo simulation is then performed to calculate the return on investment (ROI) and the payback period of each portfolio. Lastly, inclusion vs. exclusion of generation and export tariffs are compared for each financial indicator. The results show that the portfolio with the maximum output offers the highest ROI and shortest payback period while the portfolio with the minimum risk indicates the lowest ROI and longest payback period. This study also reveals that inclusion of tariffs can significantly influence the financial indicators, even more than the other identified uncertainties. (C) 2017 Elsevier Ltd. All rights reserved.


Solar Energy; Photovoltaic Power Systems; Monte Carlo Method; Market Volatility; Energy Economics; Community Solar; Monte Carlo Simulation; Photovoltaic Systems; Portfolio Theory; Uncertainty; Environmental Uncertainties; Financial Indicator; Financial Uncertainties; Physical Uncertainties; Identified Uncertainties; Probabilistic Model; Mean-variance Portfolio Theory; Probabilistic Valuation; Individual Rooftop Photovoltaic Systems; Financial Valuation; Probabilistic Portfolio-based Model; Investment; Monte Carlo Methods; Photovoltaic Cells; Risk Analysis; Tariffs; Resolution Lidar Data; Electricity Consumption; Pv Systems; Autoregressive Models; Potential Assessment; Generation Systems; Neural-networks; Energy; Buildings; Economic Theory; Electricity; Exports; Probabilistic Models; Risk